Section 75 applies to purchases abroad, House of Lords rules

FIVE Law Lords have upheld a clarification of the Consumer Credit Act which offers consumers more protection on purchases made abroad.

Earlier this year, the Appeal Court ruled that Section 75 of the Act should apply even when a UK credit cardholder makes a purchase abroad or from an overseas retailer.

Section 75 offers protection to all credit card purchases between £100 and £30,000 when the good or service paid for is damaged or not delivered.

However, whether this protection extends to services and goods purchased abroad or from an overseas retailer has been a grey area for some time.

Three major credit card providers - Tesco Personal Finance, American Express and Lloyds TSB - as well as the Association of Payment and Clearing Services (Apacs), have all argued that their responsibility towards consumers should end at the UK border.

This ruling ends that argument.

A clarification

In upholding the earlier decision of the Appeal Court, the House of Lords has effectively ruled that there are no territorial limitations set out in the Consumer Credit Act.

The terms of the Act make no specific provision for goods and services bought online which, many have argued, means that, by default, the legislation should only apply to UK purchases.

Yet, ever since 2004, the Office of Fair Trading (OFT) has questioned that assumption.

That year the OFT took the issue to the High Court but, after a strong defence from Lloyds TSB, lost the case.

Undeterred, however, the regulator took the case to the Appeal Court where the original ruling was overturned.

The House of Lords decision yesterday was, then, a final appeal to that appeal judgement and the final nail in the coffin for the case that Section 75 should only apply to purchases within this country.

A spokesperson from the OFT said that the ruling, "confirms that credit card issuers are individually and jointly liable with suppliers if a consumer has a valid claim against the supplier for misrepresentation or breach of contract.

"The application of section 75 to overseas credit card purchases has long been uncertain, which is unsatisfactory for UK consumers. We are pleased that the House of Lords has resolved the issue, and particularly happy that it has been resolved in a way that gives greater protection to consumers."

Lloyds TSB said they were "disappointed" with the outcome of the ruling.

However, one Apacs official took the high road, saying that the final judgement did at least mean that there was no longer a grey area on the subject.

"At long last we have clarity," the spokesperson said. "The banks now know where they stand and there's no doubt that it's good for consumers."

Good news for consumers?

While the ruling is undoubtedly good news for consumers, however, it doesn't actually change the way that credit card providers behave towards consumers making section 75 claims.

Card companies already meet valid overseas claims.

The significant change which will be enacted as a result of this ruling will be, however, less easy to see: it'll be a change in consumer confidence in general.

E-commerce, in particular, relies on cross-border transactions.

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